Super SARs - Guidance for information sharing
Sometimes new rules and guidance seem to slip under the radar. We consider that this certainly has, however, understanding the rules and how they play out in practice will be of fundamental importance to regulated entities.
Super SARs: sharing is caring
Taking a step back, the Criminal Finances Act 2017 ("CF Act") brought about significant changes in the money laundering reporting regime, introducing the new so-called "Super SARs" (Suspicious Activity Reports). The regime allows regulated sector entities to voluntarily share information with other regulated sector entities for the purposes of submitting a joint SAR. The Super SAR is intended to condense information from a variety of sources, with a view to producing a higher quality. Following this, the Home Office has published a circular providing further guidance relating to information sharing between banks and other financial institutions as provided for by the CF Act.
This briefing concentrates on the Home Office circular which is intended to serve as guidance. It sets out information in relation to the application of the legislation; types of information sharing; processes and procedures; and roles and responsibilities of those involved in information sharing. Annexes to the guidance contain flowcharts setting out the procedure to be followed in relation to information sharing initiated by a regulated sector entity and information sharing initiated by the NCA.
Background
The changes brought about by the CF Act were set out in the Government's April 2016 "Action Plan for Anti-Money Laundering and Terrorist Financing". This outlined proposals to reform the SARs regime and to improve information sharing both between law enforcement agencies and the private sector, as well as within the private sector, by introducing "legal information sharing gateways". The plan was to build on the work done by the Joint Money Laundering Intelligence Taskforce (a pilot established in February 2015 under the Serious and Organised Crime Financial Sector Forum) which involved the National Crime Agency ("NCA") and representatives from the financial sector testing out information sharing on a "collaborative, cross-sector basis".
The CF Act provisions relating to information sharing came into force in October 2017 and amended the Proceeds of Crime Act (POCA) and the Terrorism Act 2000.
The provisions allow banks and other businesses in the regulated sector to share information with each other on a voluntary basis in relation to a suspicion that a person is engaged in money laundering; suspicion that a person is involved in the commission of a terrorist financing offence, or in relation to the identification of terrorist property or its movement or use.
Information sharing
Information sharing under these provisions is entirely voluntary and comes in two forms: (1) regulated sector initiated sharing; and (2) NCA initiated sharing.
Regulated sector initiated sharing permits a regulated sector entity to request information from other regulated sector entities. Where a regulated sector entity suspects money laundering, it will send a disclosure request to the other regulated sector entity and will also notify the NCA of the intention to share information and indicate which regulated sector entities will be involved in the information sharing process. Following agreement between the parties to share information, information is disclosed to the initiating party (provided that the disclosing party is satisfied that their information will assist in determining money laundering). A joint disclosure report may then be sent to the NCA (to the extent that the information leads to a SAR being necessary). Although information sharing is voluntary, filing of a SAR is not and firms must therefore (individually) consider if they need to submit a SAR, regardless of whether they share information or their request to share is refused.
NCA-initiated sharing permits the NCA to request that the regulated sector entities voluntarily share information between each other in relation to suspicion of money laundering. It provides protection to such regulated sector entities.
Procedures
This means firms will need new policies and procedures related to the following:
1. Changes to SAR procedures to take into account a firm's ability to share information;
2. A new procedure in relation to the potential to receive sharing requests from another regulated entity:
(a) all front office staff need to be aware of this possibility;
(b) firms need to determine whether they will share; and
(c) this will need to be fed into the amended procedures (as above).
3. Policies relating to SAR submissions, assuming there has been no sharing; and
4. Training (of course!).
Key aspects of regime – Regulated sector initiated sharing
| Who does the regime apply to? | The regime applies to the "regulated sector" but the initial focus will be on credit institutions and financial institutions as defined in the Capital Requirements Regulation and POCA. |
| What are the responsibilities of the party initiating information sharing? | The party initiating the information-sharing process will be responsible for: (i) submitting a notification to the NCA that it is intending to share information with other regulated sector entities; and (ii) contacting other regulated entities with a request for information; and submitting a joint disclosure report (to the extent information is shared). |
| What about the responsibilities of other regulated sector entity disclosing information? | The party receiving the information request will be deemed to have satisfied their obligations under sections 330-331 POCA (Failure to disclose: regulated sector). This will last for a period of 84 days and will only relate to the suspicion to which the notification concerns, and "matters known, suspected or believed as the result of making of the disclosure request concerned". |
| Are there any limits to protection for the disclosing party? | There are limits to protection given to the disclosing party where the initiating party submits a notification. Section 339ZE(4) to (7) of POCA provides that the disclosing party will still need to submit a SAR in some circumstances. Where a joint disclosure report is not made but the regulated sector entity receiving the information sharing request retains a suspicion of money laundering, or develops an independent suspicion, it must submit a SAR in relation to that suspicion. |
| What is the mechanism for submitting a notification to the NCA? |
In the case of regulated sector initiated sharing the required notification must:
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| What is the mechanism for submitting a joint disclosure report? |
The existing SAR guidance on completing a SAR should be followed. In the "reasons for suspicion" box, the submitting entity should include:
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| What is sign–off procedure in relation to a disclosure report? | The joint disclosure report will need to contain a declaration of approval by the MLROs of the regulated sector entities that agree to be part of the joint disclosure report. |
| How does the information sharing regime interact with SARs? |
Broadly, the regime runs in parallel with the existing SARs regime/standard money laundering provisions. It does not remove the general obligation to report suspicion of money laundering, or the process by which suspicions are to be reported. The information sharing procedure will only apply in respect of the particular suspicion that is described in the notification, and in any joint disclosure report, and the requirement to make a SAR is only satisfied in respect of that particular suspicion. |
| What about data protection? | The Data Protection Act 1998 has been amended to allow for disclosures between regulated sector entities where disclosures are made in good faith under these provisions. Firms will, however, need to ensure that appropriate steps are taken to ensure that any disclosures made when information sharing comply with the General Data Protection Regulation. |
| What about "tipping off offence"? | The "tipping-off" offence under section 333A of POCA does not apply where information is shared in good faith under section 339ZB of POCA. |
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